The watchdog Ofgem and the Financial Services Authority (FSA) are investigating allegations that energy companies regularly manipulate the gas market after a whistleblower informed them of “unusual” gas deals.
The allegations have prompted Energy Secretary Edward Davey to say today he is “extremely concerned” and he will make a statement about this in the Commons this afternoon.
On 28th September, a market reporter at price reporting firm ICIS Heren noted some “unusual trading activity” on the British wholesale gas market, which ICIS reported to energy regulator Ofgem in October.
The trading pattern revealed six deals were done at 0.4% lower than the prevailing market trend. It is unknown who was doing the deals.
The watchdog Ofgem isn’t officially the regulator of the physical gas market but will take up that responsibility in the new year.
It said in a statement: “In preparing for full implementation of new EU legislation to tackle market abuse (REMIT), we will consider carefully any evidence of market abuse that is brought to our attention as well as scope for action under all our other powers.”
The FSA has been alerted because the price of gas has an effect on the assets, or derivatives, which it regulates. A spokesman said: “We can confirm that we have received information in relation to the physical gas market and will be analysing the information.”
All the Big Six firms denied their involvement in the trading allegations.
Centrica, the owner of British Gas stressed the point that the wholesale gas market has more than 50 participants, not just energy supply companies, handling hundreds of trades every day.
The supplier said in a statement: “Centrica has very robust governance and compliance policies… These policies are reviewed on a regular basis. Centrica’s traders are prohibited from providing price information to price reporting agencies.”
An E.ON spokesperson said: “We are confident that all of our colleagues always act in the correct manner… We expect the same from all other market participants and consider any attempt to manipulate benchmarks or market prices as illegal.”
ScottishPower said: “Our trading division always acts with integrity and follows all rules in all of its engagements with the market.”
RWE npower added: “Every trade that we make and every transactional conversation is recorded. We comply with all European transparency regulations.”
Angela Knight, Chief Executive of supplier trade body Energy UK said: “This is a very serious issue which must be investigated swiftly. The gas market is an international one with many overseas companies trading on it as well as organisations that are not energy companies.
“Our members will all cooperate fully with the regulators and others. Customers need to have confidence in markets and authorities need to have the powers to regulate well and take action if required.”